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INTERNATIONAL REWARD

CIPD factsheet on international reward

Globalisation is creating an ever more competitive context for addressing the demands of consumers, employees and other stakeholders and, as such, professionals designing and implementing international reward and recognition programmes face many challenges.

To help UK HR professionals understand the issues involved in creating an effective international reward and recognition strategy the Chartered Institute of Personnel and Development has published a factsheet.

As well as defining the subject, the factsheet argues that a global pay-for-contribution approach is emerging for most middle and senior managers internationally adding that, as a result, employers are examining new approaches to managing talent globally as the cost and risk of moving employees around the world increases.

Further, it states that reward is an important tool in the management of the performance and engagement of those people working internationally who are so vital to organisational success.

Based on research conducted for the CIPD by Professor Stephen Perkins of the Department of Management and Professional Development, London Metropolitan University, the factsheet says that transnational reward strategies need to take into account multiple settings, including the parent country where the organisation has its headquarters, the host country where a subsidiary may be located and other countries which might be the source of, for example, employees, finance, or research and development.

The factsheet also explains that cultural differences may affect the way employees view the effort-reward relationship. Similarly, it states that political and legal structures will have an impact on the nature, value and how rewards are implemented and viewed by employees. As a result, in the case of employees sent on international assignments outside their country of origin, career planning and career-lifestyle support issues take on an even greater significance as part of the total reward portfolio.

Objectives of international reward

The CIPD says that the main objective of an international reward and recognition strategy is to provide focus for aligning corporate vision and values vertically and integrating other HRM practices horizontally across the multinational organisation.

The strategy needs to be perceived as meaningful and equitable by employees in different parts of the world. Moreover, it must also be practical to implement, and support value-adding organisational performance.

The CIPD says there are three broad objectives in designing international reward and recognition systems:

1. To design a system that fits with corporate strategy while engaging employees by demonstrating fairness and a total reward fit across international operations.

2. To design a system that facilitates knowledge transfer across corporate networks and corporately managed career development, where necessary but not always involving the geographical mobilisation of people.

3. To design a system which sets and maintains reward levels which are competitive in the relevant marketplace internationally to attract and retain talent.

Tensions to consider

CIPD research findings show that, in managing reward internationally, a number of tensions need to be recognised and addressed:

Shareholders: 80% of respondents said that the primary aim of their organisation was to maximise shareholders’ wealth. However, when asked about external sources of influence on reward policies, 42% of respondents said that shareholders had no influence at all.

Customers: Over 92% of respondents said that their organisation’s primary aim was to meet customers’ needs and customers’ expectations. However, 50% attributed a zero influence on reward strategy to major clients.

Board of directors: Half of respondents felt that the board of directors had a strong influence on the alignment of corporate reward strategies. However, a quarter perceived the board as having little or no influence.

Employee characteristics: those who appear to be most adaptive and open to the “boundary-less career” may use their network building for employability purposes rather than to advance corporate interests.

Alternatives to international reward

In recent years, international assignments have come under closer scrutiny as costs increase and individual business cases are being judged on a return-on-investment basis. As a result, other options such as recruitment and development of local employees and alternative forms of transnational mobility such as short-term assignments are being considered.

Nevertheless, where international placements are made, technology is making it easier for organisations to communicate their total reward offering to employees and to manage the process irrespective of location.

Want to know more?

Title: International Reward Factsheet, Chartered Institute of Personnel and Development, April 2008.

The Chartered Institute of Personnel and Development (CIPD) has more than 130,000 members and is the “leading professional institute for those involved in the management and development of people”. To find out more visit www.cipd.co.uk.

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